LOTTE Confectionery Co., Ltd.

One of South Korea’s largest distribution centers handles over 700 kinds of dry and frozen foods under one roof

LOTTE Confectionery Co., Ltd. (headquartered in Seoul, South Korea) is a general confectionery manufacturer. In January 2010, LOTTE Confectionery started operating “Gwangmyeong Distribution Center” at Gwangmyeong City, which is located southwest of Seoul. As part of its integrated distribution plan, the company consolidated its distribution of dry and frozen goods from several small and medium-scale centers into one. In order to meet the demands of retailers with increasing product volume, the company constructed a highly automated distribution system. The changes drastically reduced workloads and labor costs. The whole LOTTE group cooperated in making the center a reality. It was constructed by LOTTE Engineering & Construction Co., Ltd., and is run by LOTTE Logistics Corp.

Selection of goods, inventory and operations were consolidated to enhance efficiency, as well as improve distribution service levels

Gwangmyeong Distribution Center stores products from four factories of LOTTE Confectionery in Korea, as well as for contract manufacturers. It ships products to 26 distribution centers including GMSs (General Merchandise Stores), LOTTE Mart, supermarkets, and convenience stores. The center also delivers products to 24 sales offices for route sales in Seoul.

In a previous distribution center, storage operations were performed by floor handling equipment, and sorting/picking operations were done manually. This situation caused increased shipping errors and frequent delivery delays. Additionally, the product volume increased as retailers and convenience stores expanded their business due to changes in consumer buying patterns.

Received dry goods are stored in the unit load AS/RS. Then, they are retrieved by pallet-shipping or case-shipping, depending on the shipping volume or unit. The pallet-shipping has two lines. In one line, products are retrieved from the unit load AS/RS and transported onto conveyor by STVs for shipment. In the other line, products are shipped via a pallet changer and a wrapping machine.

In the case-shipping, some goods are automatically taken out by case with a depalletizer, while others are picked by hand after they are retrieved from the unit load AS/RS. In both lines, the products that are retrieved by case from pallets are temporarily stored in the mini load AS/RS. Then, they are retrieved from the mini load AS/RS according to shipping orders, sorted via SFN, and shipped to their final destinations.

Frozen goods including ice cream are stocked in the unit load AS/RS and the Mobile Racks on the fifth floor. The products that need to be shipped frequently are stored in the Mobile Racks. The temperature inside of operation area is -5 °C (23 °F). The inside of the unit load AS/RS and the Mobile Racks is -35 °C (－31 °F) in order to maintain product quality.

Pallets are transported by dual STVs to pallet shipping lines and case shipping lines after being retrieved from unit load AS/RS.

Depalletizer retrieving cases by layer from pallets.

Surfing Sorter with ten chutes and sorting capacity 2,400 cases per hour. Pallet shipping line on the right.

Goal is cost reduction of labor and distribution

The new integrated and systemized center has a processing capability as high as the other multiple centers. The new center covers 60% of the product volume in the Seoul metropolitan area. Delivery to other distribution centers is scheduled at a fixed time once a day. The center is dedicated solely to retailers, which is a first for the company. The automation of the new center is expected to result in significant cost reduction through lower labor costs, as well as batch-processing of products and efficient collection delivery. The new center also optimizes inventory by managing accurate information through a computer control.

Safe and fresh products can be supplied

“By establishing a major site for city-type distribution with the integrated distribution plan of the LOTTE group, we have achieved efficient operations, short delivery lead time, and improvements in our service levels. With an appropriate temperature control system, product quality can be maintained and safe and fresh product can be supplied to our consumers.” says Jae-Chul So, LOTTE Logistics Corp., Center Manager